“We had a lot of excess leverage," Roach said. "Where was the central bank in blowing the whistle? What didn’t they use common sense in saying no to an asset-dependent U.S. economy?”

Though Fed Chairman Ben Bernanke did a good job after the Lehman crisis, the role of a central banker was not so much dealing with post-crisis damage control, but rather being able to avoid a crisis in the first place, Roach said.

"Bernanke certainly jumped in with all the ammunition and artillery he could once it became evident that the crisis had brought the system and potentially the economy to its knees," he said. "The point I am making is that the reason he jumped in is because he and his federal colleagues condoned an era of excess that led us to the precipice that led us to the abyss."

"I don’t see anything yet from him saying that those were the type of actions and strategies that he will never follow again," he added.

The economy went through an era of excess because policy makers and politicians were under the notion of self-regulation, Roach said, adding that the government needs to be more disciplined and transparent in the way it runs its system. This means much tougher and tighter regulatory scrutiny.

The policy mandates of the central bank need to be broadened to include financial stability along with price stability which will allow for a more prudent management of financial institutions, he said.

"Let's get away from who's going to be the regulator and first of all, focus on what needs to be regulated," he said.

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